The Schwartz Report

Can Microsoft Unseat Amazon in the Cloud?

Game on. Microsoft's launch yesterday of Windows Azure Infrastructure Services, armed with another round of price cuts, puts the two cloud giants in the Pacific Northwest on more equal footing. Three years after launching Windows Azure as a complete platform as a service, or PaaS, Microsoft finally is able to let customers stand up their own virtual machines in the company's cloud. That means for the first time Windows Azure's infrastructure as a service (IaaS) is now a viable alternative to Amazon's widely used EC2.

Thanks to cut-rate pricing and a widely distributed global cloud service, some of the largest cloud implementations run on Amazon's EC2 including Netflix, Nasdaq, Dropbox, and even Salesforce.com's Heroku service. Almost everyone offering various IT services I speak with say they use Amazon as their provider. Yet surprisingly, Windows Azure may be more widely used than it appears.

A survey of Redmond magazine readers, who are obviously skewed toward Microsoft offerings, shows 26 percent of 979 respondents use Windows Azure, while an equal percentage use "other" services not mentioned in our survey (Rackspace, AT&T, Verizon, Google, HP, Dell, IBM and Oracle). That suggests many are using regional hosting providers or nothing at all. As for Amazon, 13 percent indicated they're using EC2, However the number that plan to use Amazon over the next 12 months jumps to 20 percent, while Windows Azure increases to 28 percent. Those using other services will drop to 18 percent.

It's not just Redmond magazine readers who say Windows Azure is the most widely used cloud provider. Morgan Stanley's April CIO survey found 20 percent use Windows Azure for PaaS functionality compared with 12 percent who use Amazon, though it should be noted that Amazon is primarily an IaaS provider. The Morgan Stanley CIO survey showed 13 percent are using Windows Azure IaaS, presumably the preview release, since it was just made broadly available yesterday. As a result, Morgan Stanley is bullish on Microsoft's cloud prospects and it was a key reason the investment bank upgraded the company's stock.

"Our research suggests Microsoft's large technology base and captive audience of over
5 million .NET developers has propelled the company into an early leadership position in Cloud Platforms," wrote Keith Weiss and Melissa Gorham in yesterday's research note. "Additionally, the cloud-based Office 365 platform continues to see good adoption in customers of all sizes. The contribution from these cloud initiatives remains relatively small today and the shift to subscription licensing may actually create slight near-term headwinds. However, the potential positive sentiment impact of Microsoft being seen as a 'winner' in the cloud as these offerings gain scale and exposure could act as a positive catalyst for MSFT shares, in our view."

Still IaaS is where the action is and Amazon appears to be the company to beat. In addition to Amazon a large swath of IaaS providers including Rackspace, IBM, HP, AT&T and Piston Cloud, among a slew of others are building out a formidable rival with OpenStack. Infrastructure providers such as Cisco, Intel and Red Hat, among over 100 others also have big bets on OpenStack as well. Built on the open source cloud compute, storage and networking platform, a lot of players are investing heavily in OpenStack. The OpenStack Foundation, which is having its biannual summit this week in Portland, Ore., just released its twice yearly platform update, code-named "Grisly." Keep an eye on my Cloud Report blog for updates on OpenStack. One thing I should note is that Grisly includes improved Hyper-V support, something that was notably absent in earlier releases, as I noted last month.

Turning back to Windows Azure, Forrester analyst James Staten said in a blog post yesterday that after yawning about the long anticipated Microsoft and OpenStack releases, that Redmond stands to gain further credibility as a cloud infrastructure provider with its IaaS release.

"Microsoft has done a good job of balancing the sense of comfort and familiarity with this release between those who have experience with other IaaS platforms and those who want the familiarity of their existing Microsoft corporate environments," Staten wrote. "Microsoft Windows Azure IaaS will feel familiar to developers who have experience with Amazon Web Services' Elastic Compute cloud."

Staten added that System Center admins will find the service familiar and very much like a Hyper-V compute pool. "This is probably the best validation of the hybrid cloud model from a major tech supplier so far this year," he said. "Microsoft is steadily delivering on its promise to make the extended, hybrid cloud the way forward for enterprise customers; especially systems admins, who want the option of extending datacenter workloads to the cloud without giving up the tools and IT processes they have spent years refining."

It appears Windows Azure will appeal to large audience of enterprise customers but it also looks like many business units will use different cloud service providers depending on the nature of the application, the development platform and the service levels required. Likewise there are hundreds of smaller providers out there offering services.

Who is your cloud service provider of choice now and looking ahead? Drop me a line at jschwartz@1105media.com.